Cleveland Overview

Cleveland firmly ensconced as Hub of the Delta

City gearing up for a new $10 million plant

On the surface, the dispute between the Municipal Energy Agency of Mississippi (MEAM) and the Clarksdale/Yazoo City alliance appears to be about money and contracts. Yazoo City and Clarksdale say they are pulling out of the eight-city energy-supply association because they can provide power to their cities less expensively on their own.

MEAM says that they have the right to do this, but only in accordance with the original MEAM contract, which specifies that an entity can only withdraw from the agency on condition of five years’ written notice. This provision is typical of this type contract and lends a degree of stability to a coalition of political bodies.

Complicating the matter is the fact the MEAM has financed the upgrading of the generating facilities at Yazoo City and Clarksdale. The total project upgraded three frame-five gas turbines and added three waste heat recovery steam generators and cost in excess of $10 million. Part of this project was paid for by MEAM revenues and the rest by a $5 million 1994 bond issue.

The Greenwood generating facility was also part of this project, but Greenwood elected to pay out of other resources rather than participate in the bond issue. This leaves seven cities responsible for the bond issue and dependent on the generating capacity of the two cities for a portion of their electrical power supply.

MEAM also purchases power from other resources to supplement the generating capacity of Yazoo City, Clarksdale and Greenwood. SEPA, Cajun Electric Cooperative, Oklahoma Gas and Electric and Entergy Services, Inc. are among recent suppliers with Entergy holding the largest contracts.

The exit of Yazoo City and Clarksdale from MEAM would hurt the organization not only in loss of generating power but also in the loss of volume purchasing power from other supplies. This type loss is one of the reasons for a five-year notice in the original contract. The other cities involved in MEAM would be given time to deal with the adverse impact.

Clarksdale and Yazoo City, however, say that MEAM has broken its contract with them. The two cities plan to form their own alliance to take advantage of the savings that they perceive to be available in the deregulated wholesale energy market. They also plan to buy out the bond issue obligation from MEAM and finance it through revenue bond issues of their own.

At this point the story breaks down into two other issues. One is a very legitimate difference in style of operation and management between MEAM and the two cities. The other is a rather obvious problem with power, personality and disgruntlement.

Neil Davis, General Manager for MEAM, admits to being conservative in his management style. "I’m the first to say we’re not where we’d like to be costwise," Davis says, "but we know that we’ve controlled and lowered costs over the years. We’re very competitive and have the lowest costs in the area.

"Entergy views MEAM as a good wholesale customer and they do all they can to work with us. We have a good track record with them. We are moving cautiously. We’re not going to abandon a good relationship unless we are sure it will improve our circumstances. We look at the end of the year, not each transaction," Davis continues.

"Entergy provides a load-following service that keeps the load balanced and has energy follow demand on an instantaneous basis. Our facilities are not equipped to do this. We know Entergy can and will do this and we don’t have the track record with other suppliers."

Bob Priest, General Manager of the Yazoo City Public Service Commission, is much more daring in his approach. "You have to take a risk from time to time," he says. "MEAM hasn’t changed in the last ten years, and the utility industry has changed drastically."

Public Service and other officials from both Clarksdale and Yazoo City are furious about the new contract with ESI. Both cities would prefer not to do business with Entergy at all, an attitude that has little or nothing to do with MEAM. Both parties admit that there have been divisive issues for three or four years, but the recent contract seems to have been the straw that broke the camel’s back.

Sources who prefer to remain unnamed say that there are other problems. Various people are angry at staff for various personal reason. Others see a conflict of interest in Public Service professionals being on the Board, which was designed as a citizen review entity. They say it puts them in the position of being able to review their own performance. Comments from people from the unhappy cities, including their attorney’s presentation to the Board, contain thinly veiled accusations of wrongdoing that border on character assassination.